SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the quarterly period
ended March 26, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the transition period
from to
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Commission File No. 1-4663
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Crompton & Knowles Corporation
(exact name of registrant as specified in its charter)
Massachusetts 04-1218720
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Station Place, Metro Center
Stamford, Connecticut 06902
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(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203)353-5400
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ----
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at April 20, 1994
---------------------------- -----------------------------
Common Stock, $.10 par value 51,286,996 shares
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CROMPTON & KNOWLES CORPORATION
FORM 10-Q
FOR QUARTER ENDED MARCH 26, 1994
INDEX
-----
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Financial Statements and
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Accompanying Notes
------------------
. Consolidated Statements of Earnings
(unaudited) - Quarters ended March 26, 1994 and
March 27, 1993
. Consolidated Balance Sheets - March 26, 1994
(unaudited) and December 25, 1993
. Consolidated Statements of Cash Flows
(unaudited) - Quarters ended March 26, 1994 and
March 27, 1993
. Notes to the Consolidated Financial
Statements - Quarter ended March 26, 1994
(unaudited)
Item 2. Management's Discussion and Analysis of Financial
------ -------------------------------------------------
Condition and Results of Operations
-----------------------------------
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders
------ ---------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
------ --------------------------------
Signatures
Exhibit 11 Statement Re Computation of Per Share Earnings
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UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
Quarters ended March 26, 1994 and March 27, 1993
(In thousands, except per share data)
March 26, March 27,
1994 1993
Net sales $ 133,594 $ 133,743
Cost of products sold 90,910 91,062
Selling, general and administrative 19,804 20,161
Depreciation and amortization 3,226 3,150
Interest 182 408
Other income (544) (554)
Total costs and expenses 113,578 114,227
Earnings before income taxes 20,016 19,516
Income taxes 7,258 7,221
Net earnings $ 12,758 $ 12,295
Net earnings per common share $ .25 $ .24
Dividends per common share $ .10 $ .08
Average shares outstanding 51,988 52,095
See accompanying notes to the consolidated financial statements.
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<PAGE>
March 26, 1994 UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 26, 1994 and December 25, 1993
(In thousands)
March 26, December 25,
1994 1993
ASSETS
CURRENT ASSETS
Cash $ 4,865 $ 9,284
Accounts receivable 82,495 84,482
Inventories 117,855 113,932
Other current assets 13,264 12,698
Total current assets 218,479 220,396
NON-CURRENT ASSETS
Property, plant and equipment 100,605 99,925
Cost in excess of acquired net assets 33,108 33,275
Other assets 9,580 9,650
$ 361,772 $ 363,246
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 2,995 $ 5,100
Accounts payable 47,140 44,905
Accrued expenses 21,654 25,574
Income taxes payable 15,525 12,935
Other current liabilities 7,596 6,925
Total current liabilities 94,910 95,439
NON-CURRENT LIABILITIES
Long-term debt 4,000 14,000
Accrued postretirement liability 9,079 9,084
Deferred income taxes 4,769 4,727
Total non-current liabilities 17,848 27,811
STOCKHOLDERS' EQUITY
Common stock 5,336 5,336
Additional paid-in capital 61,892 61,783
Retained earnings 198,857 191,230
Accumulated translation adjustment 179 (557)
Treasury stock at cost (11,136) (11,278)
Deferred compensation (6,114) (6,518)
Total stockholders' equity 249,014 239,996
$ 361,772 $ 363,246
See accompanying notes to the consolidated financial statements.
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<PAGE>
UNAUDITED
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Quarters ended March 26, 1994 and March 27, 1993
(In thousands)
March 26, March 27,
Increase (decrease) to cash 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 12,758 $ 12,295
Adjustments to reconcile net earnings
to net cash provided
by operations:
Depreciation and amortization 3,226 3,150
Deferred compensation 404 403
Changes in assets and liabilities, net (416) (6,467)
Net cash provided by operations 15,972 9,381
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (3,267) (1,673)
Other investing activities 12 137
Net cash used by investing activities (3,255) (1,536)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term debt (10,000) -
Change in notes payable (2,142) (3,164)
Net treasury stock activity 70 159
Dividends paid (5,131) (4,093)
Net cash used by financing activities (17,203) (7,098)
CASH
Effect of exchange rates on cash 67 (109)
Change in cash (4,419) 638
Cash at beginning of period 9,284 2,441
Cash at end of period $ 4,865 $ 3,079
See accompanying notes to the consolidated financial statements.
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<PAGE>
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Quarter ended March 26, 1994 (Unaudited)
(In thousands)
PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------
The information included in the foregoing consolidated financial
statements is unaudited but reflects all adjustments (consisting
only of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair statement of the results for
the interim periods presented.
Included in accounts receivable are allowances for doubtful
accounts of $3,679 in 1994 and $4,072 at December 25, 1993.
Accumulated depreciation amounted to $76,190 in 1994 and $73,387
at December 25, 1993.
Accumulated amortization of cost in excess of acquired net assets
amounted to $5,705 in 1994 and $5,456 at December 25, 1993.
Other current liabilities primarily include customer deposits.
It is suggested that the interim consolidated financial
statements be read in conjunction with the consolidated financial
statements and notes included in the Company's December 25, 1993
Annual Report on Form 10-K.
INVENTORIES
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Components of inventories are as follows:
March 26, Dec. 25,
1994 1993
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Finished goods $ 58,297 $ 57,987
Work in process 28,548 25,748
Raw materials and supplies 31,010 30,197
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$117,855 $113,932
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<PAGE>
CAPITAL STOCK
-------------
There are 53,361,072 common shares issued at $.10 par value, of
which 2,039,076 shares and 2,069,547 shares were held in the
treasury at March 26, 1994 and December 25, 1993, respectively.
EARNINGS PER COMMON SHARE
-------------------------
The computation of earnings per common share is based on the
weighted average number of common and common equivalent shares
outstanding. A dual presentation of earnings per common share
has not been made since there is no significant difference in
earnings per share calculated on a primary or fully diluted
basis.
BUSINESS SEGMENT DATA
---------------------
March 26, March 27,
1994 1993
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SALES
Specialty chemicals $ 95,586 $ 99,581
Specialty process equipment
and controls 38,008 34,162
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$133,594 $133,743
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OPERATING PROFIT
Specialty chemicals $ 16,078 $ 17,028
Specialty process equipment
and controls 6,858 5,688
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22,936 22,716
General corporate expenses, net ( 2,738) ( 2,792)
Interest expense ( 182) ( 408)
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Earnings before income taxes $ 20,016 $ 19,516
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER RESULTS
---------------------
Overview
--------
Consolidated net sales of $133.6 million for the first quarter
of 1994 were essentially unchanged from the first quarter of
1993. Net earnings of $12.8 million were 4% higher than in
1993. Net earnings per common share of $.25 increased 4% from
the $.24 reported last year.
Gross margin as a percentage of net sales of 32.0% was slightly
higher than the 31.9% reported in the first quarter of 1993.
Operating profit of $22.9 million increased 1% from the first
quarter of 1993 with all of the increase coming from the
specialty process equipment and controls segment.
Specialty Chemicals
-------------------
Sales in the specialty chemicals segment were $95.6 million
representing a decline of 4% from the first quarter of 1993.
The decrease was attributable to lower selling prices (2%),
lower unit volume (1%) and the impact of foreign currency
translation (1%).
Domestic dyes sales of $50.3 million were lower than the prior
year by 6% primarily due to lower selling prices and
weak demand for apparel, aggravated by poor weather conditions
which also disrupted production and delayed shipments of raw
materials and finished goods. International dyes sales of $22.4
million were lower by 6% versus the first quarter of 1993
primarily as a result of foreign currency translation. Specialty
ingredients sales of $22.9 million rose 3% primarily reflecting
increased unit volume in sweetener ingredient products. The
percentage of sales outside the United States decreased slightly
to 25% from 26% in the first quarter of 1993.
Operating profit of $16.1 million for the first quarter of 1994
decreased 6% from 1993. Most of the decrease was attributable
to lower unit volume and the impact of lower pricing not fully
offset by lower raw material costs. The percentage of operating
profit outside the United States decreased to 19% from 22% in
1993 primarily due to the negative impact of foreign currency
translation.
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<PAGE>
Specialty Process Equipment and Controls
----------------------------------------
The Company's specialty process equipment and controls segment
reported sales of $38.0 million representing a 11% increase over
the first quarter of 1993. Approximately 8% was attributable to
unit volume and 3% to pricing. Export sales accounted for 17%
of total segment sales versus 25% for the comparable period in
1993. Operating profit for the first quarter of 1994 increased
21% to $6.8 million primarily as a result of higher unit volume
and improved pricing. The order backlog for extruders and
related equipment at the end of the first quarter of 1994
amounted to $41 million compared to $38 million at the end of
fiscal 1993.
Other
-----
Selling, general and administrative expenses of $19.8 million
decreased 2% versus the comparable period in 1993 as planned
cost reductions more than offset inflationary cost increases.
Depreciation and amortization of $3.2 million increased 2%
versus 1993 primarily as a result of a higher fixed capital
base. Interest expense decreased 55% to $182 thousand primarily
due to lower borrowings versus the first quarter of 1993. Other
income of $544 thousand was essentially unchanged from the first
quarter of 1993. The effective tax rate of 36.3% was slightly
lower than the 37% in the 1993 period.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The March 26, 1994 working capital balance of $123.6 million
decreased 1% from year-end 1993, while the current ratio
of 2.3 remained unchanged. Days sales in receivables of
54 days increased slightly from 52 days at year-end 1993.
Inventory turnover of 2.9 for the first quarter of 1994 remained
unchanged from year-end 1993.
Cash flows from operating activities of $16.0 million increased
70% over the first quarter of 1993 and was used primarily to
finance capital expenditures, pay cash dividends and reduce
notes payable and long-term indebtedness. The Company's debt to
total capital ratio decreased to 3% from 7% at year-end 1993.
Capital expenditures are expected to approximate $20 million in
1994 primarily for expansion and improvement of operating
facilities in the United States and Europe. Long-term liquidity
requirements including such items as capital expenditures and
dividends are expected to be financed from operations.
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<PAGE>
INTERNATIONAL OPERATIONS
------------------------
The lower U.S. dollar exchange rate at March 26, 1994 versus
year-end 1993 for the Belgian Franc and French Franc accounted for
the increase of $736 thousand in the accumulated translation
adjustment account since year-end 1993. Changes in the balance
of this account are primarily a function of fluctuations in
exchange rates and do not necessarily reflect either enhancement
or impairment of the net asset values or the earnings potential
of the Company's foreign operations.
The Company operates manufacturing facilities in Europe which
serve primarily the European market. Exchange rate disruptions
between the United States and European currencies, and among
European currencies, are not expected to have a material effect
on year-to-year comparisons of the Company's earnings.
RESEARCH AND DEVELOPMENT
------------------------
The Company employs about 240 engineers, draftsmen, chemists,
and technicians responsible for developing new and improved
chemical products and process equipment systems for the
industries served by the Company. Year-to-year variations in
sales of such new products generally are not expected to
significantly affect the Company's results versus the prior
year. Research and development expenditures totalled $2.6
million for the first quarter of 1994 compared to $2.9 million
in the comparable 1993 period.
ENVIRONMENTAL MATTERS
---------------------
The Company's manufacturing facilities are subject to various
federal, state and local requirements with respect to the
discharge of materials into the environment or otherwise
relating to the protection of the environment. The Company has
been designated, along with others, as a potentially responsible
party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, or comparable state
statutes, at two waste disposal sites; and two inactive
subsidiaries have been designated, along with others, as
potentially responsible parties at a total of four other sites.
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<PAGE>
While the cost of compliance with existing environmental
requirements is expected to increase, based on the facts
currently known to the Company, management expects that those
costs, including the cost to the Company of remedial actions at
the waste disposal sites where it has been named a potentially
responsible party, will not have a material effect on the
Company's liquidity and financial condition and that the cost to
the Company of any remedial actions will not be material to the
results of the Company's operations in any given year.
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<PAGE>
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders
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(a) The Annual Meeting of the Stockholders was held
on April 12, 1994.
(b) Proxies for the Annual Meeting were solicited
pursuant to Regulation 14A under the Securities
Exchange Act of 1934, there was no solicitation
in opposition to the nominees for the Board of
Directors as listed in the Proxy Statement, and
all of such nominees were elected.
(c) A brief description of each matter voted upon at
the Annual Meeting, and the results of voting,
are as follows:
1. Election of four (4) Directors to serve for a term
expiring in 1997:
FOR AGAINST
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Robert A. Fox 40,738,295 Shares 561,933 Shares
Roger L. Headrick 40,748,534 Shares 551,694 Shares
Leo I. Higdon, Jr. 40,661,226 Shares 639,002 Shares
Howard B. Wentz, Jr. 40,749,687 Shares 550,541 Shares
2. Approval of the selection by the Board of Directors of
an auditor for 1994:
FOR AGAINST ABSTAINED
----------------- ---------------- --------------
40,780,868 Shares 63,695 Shares 455,665 Shares
3. Approval of the material terms of the performance goal
under the Annual Incentive Compensation Plan for "A"
Group of Senior Executives:
FOR AGAINST ABSTAINED
------------------ ---------------- --------------
39,156,609 Shares 1,494,483 Shares 649,136 Shares
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits
Number Description
------ -----------
(11) Statement Re Computation of Per Share
Earnings
(b) No reports on Form 8-K were filed during the
quarter for which this report is filed.
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<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
CROMPTON & KNOWLES CORPORATION
(Registrant)
May 9, 1994 By: /s/ Charles J. Marsden
---------------------------------
Charles J. Marsden
Vice President - Finance
(Principal Financial Officer)
May 9, 1994 By: /s/ John T. Ferguson
---------------------------------
John T. Ferguson, II
General Counsel and Secretary
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EXHIBIT 11
<PAGE>
CROMPTON & KNOWLES CORPORATION AND SUBSIDIARIES
EXHIBIT 11 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
PRIMARY FULLY DILUTED
Quarter Ended Quarter Ended
March 26, March 27, March 26, March 27,
1994 1993 1994 1993
Earnings
Net earnings $ 12,758 $ 12,295 $ 12,758 $ 12,295
Shares
Weighted average shares
outstanding 51,305 51,150 51,305 51,150
Common stock equivalents 654 918 683 945
Average shares outstanding 51,959 52,068 51,988 52,095
Per share
Net earnings $ 0.25 $ 0.24 $ 0.25 $ 0.24
